Challenges, opportunities face U.S. feedgrains

Profitability for U.S. corn, grain sorghum and wheat depends on the grain industry's ability to demonstrate the advantage of buying from the United States, as well as educating customers on bio-tech issues and keeping close tabs on competitors.

“Imagination also will play a key role,” says Kenneth Hobbie, executive vice president, U.S. Grains Council.

“We have to continue searching for new markets and new uses for grains,” he said recently in an address to the Texas Commodity Symposium at Amarillo.

Hobbie expressed optimism for the grain industry and provided a “report card” as a benchmark for improvement.

“Trade outlook gets a B+: that's up from a B. The world economy rates a C. We still see some cloudiness. Biotech merits a B+ and that's an improvement.

Hobbie said the export market is critical for the U.S. grain industry, accounting for 21 percent of annual feedgrain sales. Adding livestock exports, or “grain on the hoof,” pushes the percentage even higher.

Corn producers export 20 percent of their production and grain sorghum exports account for almost 50 percent of production.

“Markets are being driven by growing populations, but populations that are moving into urban areas where they find jobs and better incomes.”

He said world economic growth; changing dietary demands, which include more meat; nations' willingness to trade; and competition for markets play key roles in international trade.

“Customers have changed, Hobbie said. “In 1980, about 80 percent of grain purchasers were governments; now that's only 20 percent of the market.”

Hobbie said the United Sates maintains the lion's share of the world corn and gain sorghum markets. “We provide 64 percent of the corn traded in international markets and 77 percent of the grain sorghum, which may increase to 84 percent in 2002.”

“Japan is by far the biggest customer,” Hobbie said, “but they dropped some last year. The Star Link issue affected the market, but that likely will change. The Japanese market stopped growing five years ago, when their livestock production topped out.

“But we have new market opportunities with a biodegradable product made from corn, and Star Link is almost gone as an issue. Japan offers a good opportunity for value-added products.”

Mexico has emerged as an important customer, “a positive effect of NAFTA. Canada also makes the top 10 list.”

Hobbie said Mexico tops the list of customers for grain sorghum and “we see nothing to slow that market.”

Taiwan buys nearly 100 percent of its corn from the United States and also is moving into value-added products. They are developing an ethanol industry and are interested in the biodegradable products.”

Egypt has seen increases in income with an accompanying demand for more livestock. “The current turmoil in the Middle East could affect these markets,” he said.

South Korea is a puzzle. “They are buyers of opportunity, looking for the cheapest feed available. They have gone to China a lot, but the WTO may help us.”

South and Central American countries, combined, make up the third largest market for U.S. coarse grains.

“China offers a significant opportunity. The WTO agreement allows 300 million bushels of corn into China. New Chinese customers also are unaffected by government policy, and we're confident they are ready to buy grain.”

He said Russia is coming back as customer for feedgrains, mostly for poultry. “They will buy one-half million tons this year.”

Removing export subsidies will be important for improved international trade, Hobbie said. “Currently, export subsidies amount to $50 per ton.”

Sanctions also affect potential sales. “But Iran, Iraq, Libya and others are buying U.S. grain from third parties. Cuba also offers potential for increased trade.”

Hobbie said biotechnology remains a key issue in international grain trade.

“But biotech is not going away. It's not just a U.S. issue because other countries have a vested interest in the success of biotech. I don't think we're going to lose that technology. It's around for the long term.”

He said producers in the meantime might find premiums and ready markets for non-GMO grains.

“Europe, Egypt, Saudi Arabia, Algeria, Mexico, Colombia, South Korea, and China currently have issues with biotech.”

He said the problem is lack of education on biotech. “A thin layer of scientists in other countries understand biotechnology,” Hobbie said. “We'll focus efforts on education. and we're willing to work with countries to address their concerns. We can't let it become a trade barrier.”

And trade should be a key in any new farm bill, Hobbie said.

Imagination also will help sell U.S. grain. “We're looking at new uses for grain crops,” Hobbie said. “Snack foods made from grain sorghum, for instance offer new market opportunities in Japan and elsewhere. Cookies and chips made from grain sorghum flour may soon be on Japanese grocery shelves.”

PLA, a bio-based plastic with uses in textiles and other industries, also provides new market opportunities for grains. Ethanol will become more important.